Behavioral Analytics: The New Frontier?

Behavioral Analytics: The New Frontier?

Over the years, banks’ analytic capabilities have dramatically evolved. At first, analytics were descriptive, focused on answering the question “What happened?” Eventually, banks began to leverage predictive analytics to answer “What will happen?” Most recently, analytics have moved from predictive to prescriptive to answer the question “What should we do?” So, what lies ahead for financial institutions?

In a podcast interview with Worthix, former FICO CEO and Research Fellow Larry Rosenberger asserts that Behavioral Analytics are the new analytics frontier. He outlines four key pillars that make up Behavioral Analytics:

  • Behavioral Economics – Understanding cognitive biases inherent in how people make decisions, and designing incentives accordingly
  • Behavioral Psychology – Learning how people motivate themselves to create long-term, sustained habits
  • Advanced Gamification – Leveraging human-centered design principles to build systems that reward sustained engagement
  • Bilateral 1:1 Dialogue – Delivering customized, personal conversations to customers with minimal friction

Juntos, which was born from a project at the Stanford, relies on many of the principles embedded in the first three pillars to deliver the fourth pillar. Extensive user research at the beginning of each project feeds into a human-centered design process to create conversation sequences that encourage behavior change.

For example, Juntos may design dialogue to learn why a customer is motivated to save, and then share savings reminders and tips related to that motivation. Or it may employ a strategy that identifies existing customer habits, and then builds on them to form the basis of new behavior (e.g., encouraging customers to make a deposit on their way to the grocery). According to Rosenberger, banks that can use new technology like Juntos to deliver frictionless experiences stand to win and retain relationships: 

Focus groups, to this day, are expensive. If you can have a conversation using technology and ask questions to make better, appropriate offers… you can understand more about [your customers] so you can tune your communications, offers, and experiences to be more effective.

One big bank I spoke to couldn’t imagine how to manage these millions of bilateral conversations because their mindset was back in old technology. They didn’t understand what can be done today with smartphones and SMS’s… You can take advantage of fast, cheap and comfortable conversation vehicles to make this happen, and figure out what’s the next question to ask based on where the conversation has gone.

You can find the full podcast episode here!

Focus on Customer Journeys, not Touchpoints

Focus on Customer Journeys, not Touchpoints

“Trust takes time, and sometimes it’s built in the small moments. Lots of the small moments then add up to the big moments.” – Melinda Gates

This quote should ring true for financial services providers. It’s easy to get caught up trying to perfect an individual touchpoint or one-off promotion, but that isolated approach obscures the big picture: building trust and long-term loyalty with customers.

Financial institutions are increasingly shifting their focus to improving customer journeys. Research shows that the accumulation of experiences that customers go through when they interact with your brand is far more important than any individual interaction. According to McKinsey & Company, successful projects that focus on improving customer journeys typically generate 5-10% revenue growth, as well as 15-25% cost reduction. On a larger scale, companies that provide exceptional experiences make more than 26% higher gross margins than their competitors.

Ultimately, Juntos exists to build trust by improving customer journeys. Our success is not based on any perfectly worded individual message. Instead, we build trust between customers and their financial institutions with long-term conversations. We help people set financial goals, educate them about account features, and create spaces for them to ask questions and provide feedback. Only after several months of this dialogue do we typically see meaningful behavior change.

You can see the interview about trust with Melinda Gates here, and read the full McKinsey report here.